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InfoBytes
CONSUMER FINANCE HEADLINES & DEADLINES FOR OUR CLIENTS AND FRIENDS
Topics – Covered This Week (Click to View)
FEDERAL ISSUES
FDIC Chairman Says ILC Freeze Will Not Be Extended. On November 28, Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair said that the freeze on applications for insurance by industrial loan companies (ILCs) will not be extended. What was originally intended to be a six month “moratorium” on processing applications for FDIC insurance by industrial banks (reported in the July 28, 2006 issue of InfoBytes) was modified and extended early this year through January 31, 2008 (reported in the February 26th issue of InfoBytes). Chairman Bair’s announcement came in response to questions during a press conference on the FDIC’s report regarding banks’ third quarter earnings. Sources report that the Chairman said the decision not to extend the freeze was due to “litigation risk” resulting from the length of the freeze and the FDIC’s tenuous legal argument for exercising such authority. On May 21, the House of Representatives passed, by a vote of 371 – 16, the Industrial Bank Holding Company Act of 2007 (H.R. 698) which would greatly restrict the ability of retail companies to acquire ILCs. The Senate Banking Committee has not acted on this bill, but there are reports that Banking Committee Chairman Christopher Dodd (D – CT) hopes to introduce his own legislation on this topic shortly. For more information on the House bill, please see http://www.house.gov/apps/list/press/financialsvcs_dem/press052107.shtml.
Proposed FACTA Dispute Regulations Submitted for Publication. On November 29, the federal financial regulators (FRB, FDIC, OCC, OTS, NCUA, and FTC) released proposed rules to implement Fair and Accurate Credit Transaction Act (FACTA) provisions that (i) allow consumers to dispute credit report items directly with the furnisher of the information and (ii) require furnishers to take steps to ensure the accuracy and the integrity of the information they provide to credit bureaus. For a more detailed discussion of the proposed rules, see the November 16th issue of InfoBytes. Comments on the proposed rules are due 60 days after their publication in the Federal Register. For the regulators’ press release, and a link to the final rules, see http://www.federalreserve.gov/newsevents/press/bcreg/20071129a.htm.
FTC Study Finds 8.3 Million ID Theft Victims in U.S. in 2005. On November 27, the Federal Trade Commission (FTC) released a telephone survey study that estimated 8.3 million Americans, or 3.7% of the adult population, had been victims of identity theft in 2005. Among the study’s many findings, 37% of victims reported experiencing problems beyond the time they spent recovering from identity theft and their out-of-pocket expenses, including “being harassed by debt collectors, being denied new credit, being unable to use existing credit cards, being unable to get loans, having their utilities cut off, being subject to a criminal investigation or civil suit, being arrested, and having difficulties obtaining or accessing bank accounts.” The study also found that victims were more than twice as likely to report having one or more of these types of problems when thieves opened new accounts and committed other frauds than when thieves misused only existing accounts. For more information, and a copy of the study, please see http://www.ftc.gov/opa/2007/11/idtheft.shtm.
STATE ISSUES
Governor Schwarzenegger Announces Reset Delay Initiative with Servicers. On November 20, California Governor Arnold Schwarzenegger announced an agreement with four major subprime mortgage servicers, Countrywide, GMAC, Litton and HomEq, to provide a “fast-track” to restructure loans made to borrowers with a high risk of default. The agreement asks for servicers to (i) reach out “proactively to borrowers well before their loans reset,” (ii) “[s]treamline the processes by which they determine whether borrowers may reasonably be expected to be able to” make payments after their teaser rates reset, and (iii) extend the teaser rate for “people who are in their homes and making timely payments now at the starter rate, but who lenders determine cannot make the reset payment.” The governor also “encourages” all other lenders and servicers to agree to these principles. There are also news reports that the Bush Administration is working on a similar arrangement with major banks. On November 29th, Gov. Schwarzenegger also unveiled a $1.2 million program to educate at-risk borrowers and fight foreclosure. For more details on the servicer and lender initiative, please see http://www.corp.ca.gov/notices/subprime.html.
DC Council Passes New Non-Traditional Mortgage Disclosure Law. On November 16, the Council of the District of Columbia unanimously passed the Mortgage Disclosure Amendment Act of 2007 (LB 167) which would, if enacted, create a requirement to provide a special disclosure to any borrower seeking a “non-conventional mortgage” and give borrowers 5 days following receipt of the disclosure to cancel the loan application. The bill defines a non-conventional mortgage loan as “any mortgage loan that is not a fixed-rate mortgage loan with an amortization period of 30 years or less.” The law would prohibit mortgage lenders making non-conventional mortgage loans from closing on the transaction until the borrower has signed and returned the disclosure. The format of the disclosure would be established by rulemaking. If signed by the Mayor, and following the 30-day period for Congressional review, the act would take effect upon publication in the DC Register. For a copy of this bill, please see http://www.dccouncil.washington.dc.us/images/00001/20071116163817.pdf.
Colorado Mortgage Company E&O Ins. Will Not Cover Employee Brokers after Jan. 31. Errata – in the November 16th issue of InfoBytes it was reported that new rules proposed by the Colorado Division of Real Estate, requiring licensed mortgage brokers to maintain errors and omission (E&O) insurance, would permit mortgage brokers to “meet the insurance requirements if they are covered under their mortgage company’s policy.” The summary failed to note that this was a temporary exemption under the rules, which ends January 31, 2008. The relevant portion of the rule states that “through and including January 31, 2008, mortgage brokers may also comply with the errors and omissions requirement if . . . [t]hey are an officer, partner, member, exclusive agent, contractor, independent contractor or employee of a mortgage company that maintains errors and omissions insurance and such coverage includes the individual licensee.” We apologize for any confusion this may have caused you. The full rule can be found at http://www.dora.state.co.us/real-estate/rulemaking/MB/Errors_and_Omissions_Insurance.pdf.
COURTS
Appraiser Argues State Authority Preempted by Federal Appraisal Regulations. The First American Corporation has recently filed a motion to dismiss a lawsuit brought by New York Attorney General Andrew Cuomo, arguing that when it performs appraisals for a federal savings bank, its appraisal activity is extensively regulated by the Office of Thrift Supervision (OTS), and thus any state regulation and supervision of such activity is subject to preemption under the Home Owner’s Loan Act (HOLA). Cuomo v. First American Corp., Civ. No. 07-10397 (S.D.N.Y.) On November 1, New York Attorney General Cuomo announced a lawsuit against eAppraiseIT, LLC, (EA), a subsidiary of The First American Corporation, for allegedly colluding with Washington Mutual (WaMu) to inflate the appraisal values of homes, in violation of state and federal appraisal regulations. Defendants EA and The First American Corporation filed a motion to dismiss, claiming, among other things, that appraisals conducted for federal savings and loan transactions are subject to OTS regulations, and therefore the New York Attorney General has “neither regulatory authority nor oversight responsibility” to bring the lawsuit. In support of the motion, the defendants argue, among other things, that “Congress granted to OTS the exclusive power to enforce federal regulations governing the constitution and control of appraisal programs used by savings associations.” Moreover, the defendants note that the OTS and other federal banking regulators have promulgated a comprehensive regulatory scheme addressing the areas implicated in the Attorney General’s lawsuit, namely, rules applicable to “institution-affiliated parties” governing the independence of appraisers, permitting the use of a predetermined panel of appraisers, not prohibiting the thrift’s lending department from influencing the composition of the panel and dictating what is meant by the selection of appraisers. For a copy of the Motion to Dismiss Cuomo, please contact .
State Fraud Claims for No Rate Reduction after Paying Loan Discount Fee Not Preempted. On November 26, the Illinois Appellate Court for the Fifth District held that the National Bank Act did not preempt a consumer’s breach of contract, unjust enrichment, and Illinois Consumer Fraud and Deceptive Practices Act claims in connection with a lender’s alleged failure to reduce the interest rate on a mortgage loan despite the borrower’s payment of a loan discount fee. Treadway v. Nations Credit Financial Services Corp., No. 05-L-27 (Ill. App. Ct. Nov. 26, 2007). The plaintiff alleged that the defendant profited on charges for closing costs and did not reduce the interest rate despite the payment of a “loan discount fee.” The lower court held that Sections 85 and 86 of the National Bank Act preempted the plaintiff’s claims, dismissing the action. The Appellate Court, however, reasoned that because this case did not allege violations of state usury laws, the plaintiff’s claims were not preempted. Citing Burton v. Airborne Express, Inc., 367 Ill. App. 3d 1026, 1032 (2006), on the issue of federal preemption of state contract law, the court stated that “where ‘the court’s concern is restricted to the parties’ bargain,’ there is no preemption.” For a copy of this decision, please contact .
Court Blocks Foreclosure Due to Fraud by Third Party Broker and TILA Violation. On November 16, the U.S. District Court for the Northern District of California granted a temporary restraining order to enjoin foreclosure sale proceedings due to fraud by a third party broker in connection with the origination of the loan at issue and a Truth in Lending Act (TILA) violation. Phleger v. Countrywide Home Loans, Inc., 2007 U.S. Dist. LEXIS 86413. The borrower argued that the loan documents were fraudulently prepared without her consent by a third party broker. She asserted that there were numerous indicia of fraud in connection with the loan, which the lender had knowledge of, including inaccuracies in the loan documents and a credit report that indicated that the loan was secured by high-risk property and that the borrower had many recently opened bank accounts. In addition, the loan documents provided for only a two, rather than a three, business day TILA rescission period. Citing Semar v. Platte Valley Fed. Sav. & Loan Ass'n, 791 F.2d 699 (1986), the court noted that even slight technical violations provide grounds for extending a borrower’s right to rescind under TILA. Based on the foregoing, the court held that the borrower met the test for obtaining a temporary restraining order, and the defendants were enjoined from proceeding with the foreclosure pending a preliminary injunction hearing. For a copy of this opinion, please contact .
U.S. District Court: Vague Mailer Is Not Valid Firm Offer. The U.S. District Court for the Eastern District of Missouri has denied a lender’s motion for judgment on the pleadings in a Fair Credit Reporting Act (FCRA) “firm offer of credit” case. Klutho v. New Day Financial, LLC, No. 4:06CV1210 CDP, 2007 WL 4169429 (E.D. Mo. Nov. 21, 2007). In this case, the plaintiff received a mailing from defendant New Day Financial offering pre-approved loan for “up to $395,375 or more,” with no information about the minimum amount of credit available, the interest rate, or other terms of the loan. The court held that the solicitation, on its face, “provide[d] no basis for a consumer to regard it as an offer having any value, and there is nothing to distinguish it from any other unsolicited advertisement,” and, therefore, was not a valid firm offer. The court also declined to grant the lender’s motion for judgment on the pleadings on the grounds that its conduct was not willful, holding that the Safeco precedent would not preclude a finding that the lender knew it was violating FCRA or that the lender disregarded advice that it might be doing so. (For more information, see Safeco Insurance Co. v. Burr, 127 S. Ct. 2201 (June 4, 2007) reported in the June 4th InfoBytes Special Alert.) The court indicated, however, that the willfulness issue could be raised again in a motion for summary judgment (in which a factual record bearing on the issue would be available). For a copy of the opinion, contact .
District Court: Violation of FCRA Firm-Offer Requirement Was Not Willful. The same judge of the U.S. District Court for the Eastern District of Missouri who ruled against the lender in Klutho v. New Day Financial granted a different lender’s motion for summary judgment in a similar firm-offer case. Klutho v. Home Loan Center, Inc., No. 4:06CV1212, 2007 U.S. Dist. LEXIS 86303 (Nov. 21, 2007). The court had previously denied the lender’s motion to dismiss, holding that the offer letter was not a valid firm offer because it said little more than that the plaintiff had been preapproved to apply for a loan. (See the November 10, 2006 issue of InfoBytes for a discussion of that ruling.) In the current ruling, the court applied the U.S. Supreme Court’s interpretation of FCRA “willfulness” in Safeco Insurance Co. v. Burr, 127 S. Ct. 2201 (June 4, 2007) to hold although the lender violated FCRA, its interpretation that its firm offer was valid was not “objectively unreasonable,” and, therefore, the lender did not act willfully and was not liable for actual damages. The court stated that, under the Safeco approach, “the factors for determining reasonableness show that HLC is not liable for willfully violating the law. HLC’s interpretation is consistent with the statutory text, the Eighth Circuit has not adopted any standard for determining whether a lender has made a firm offer of credit, and other courts have been persuaded by arguments similar to HLC’s.” For a copy of the opinion, contact .
Rescission Period Ends Three Days after Untimely Receipt of TILA Disclosures. A Pennsylvania federal district court recently held that a borrower did not have the benefit of a three-year rescission period where the lender provided the required Truth in Lending Act (TILA) disclosures two weeks after the borrower had signed them. Colanzi v. Savings First Mortgage, LLC, 2007 U.S. Dist. LEXIS 84416, No. 07-3637 (E.D. Penn. Nov. 15, 2007). The plaintiff signed loan documents that included the required TILA disclosures and the notice of right to rescind, but she did not receive copies of the signed documents until two weeks later. The plaintiff argued that the failure to provide the documents in a timely manner amounted to no disclosure at all, and she therefore should have the benefit of the three year rescission period provided by 12 C.F.R. § 226.23(a). The court disagreed, stating that the law and regulations are clear that if the disclosures are provided, even if their receipt is untimely, the right to rescind expires after the later of the third business day following the delivery of the information or disclosure forms or three days following consummation of the transaction. Because the plaintiff received the disclosures, her rescission period expired three days following receipt of the disclosures. Consequently, the court granted the defendants' motion to dismiss. For a copy of the decision, please contact .
Claim Alleging Breach of Contract by Servicer Not Preempted under HOLA. The Seventh Circuit recently affirmed a district court’s refusal to dismiss—as preempted by the Home Owners’ Loan Act (HOLA)—a case against a federal thrift alleging numerous state law claims in connection with the thrift’s servicing practices. In re Ocwen Loan Serv., LLC Mortg. Serv. Litig., 491 F.3d 638 (7th Cir. 2007). Among other things, the plaintiff claimed that the servicer breached its contract with the plaintiff by charging late fees on payments that were not late, and increasing the monthly payment amount due without notice. The servicer argued that these allegations were preempted under Section 560.2 of the OTS' regulations, which preempts state laws purporting to impose requirements regarding mortgage loan servicing. The court, however, disagreed, stating that “[i]f an original mortgagee can be sued under state law for breach of contract, so may the partial assignee if he violates the terms of the part of the mortgage contract that has been assigned to him.” But, deeming the case “largely unripe for a determination of preemption,” the court remanded it to the district court for further clarification of relevant facts. For a copy of this opinion, please see http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=06-3132_022.pdf.
Grand Jury Subpoena not Protected from Disclosure by RFPA. Federal Judge Paul Borman recently held that the Right to Financial Privacy Act (RFPA), 12 U.S.C. §§ 3401-3422, does not prohibit the disclosure of a grand jury subpoena served on a bank in connection with the investigation of certain financial improprieties. In U.S. v. Fieger, No. 07-cr-50906 (E.D. Mich., opinion filed Nov. 27, 2007), the defendant was indicted for, among other things, conspiracy to use corporate funds to make prohibited campaign contributions to a 2004 presidential candidate. The defendant then served a subpoena on third party Comerica Bank for any documents the government had served on the bank seeking information about defendant. Comerica moved to quash the subpoena, arguing that production of the grand jury subpoena it received could violate anti-obstruction of justice laws as well as the RFPA. The court granted the motion on the grounds that production of the grand jury subpoena could create obstruction of justice liability. The court disagreed with Comerica, however, that such disclosure would violate the RFPA, finding that the RFPA prohibition on the disclosure of certain information applies only in certain enumerated circumstances not at issue in the case. The court noted that the RFPA did contain a separate mechanism that could be used to prevent the disclosure of the grand jury subpoena, but that that process had not been requested in this case. For a coy of this opinion, please contact .
FIRM NEWS
Jeffrey Naimon was quoted in November 26 issue of the American Banker discussing a recent decision by a federal court in Ohio to dismiss a foreclosure suit by a securitizing bank that could not document its possession of the loans to the judge’s satisfaction (reported in the November 16th issue of InfoBytes). The article, entitled “Ohio Ruling Called Minor Collateral-Seizure Issue,” examines easing concerns in the industry over the opinion, after broad initial anxiety about its implications. Mr. Naimon is quoted as saying that, while the ruling “will cause the servicer to start looking for all the documents earlier in the process, earlier in the delinquency,” it does not jeopardize “the validity of the loan” and does not imply that “the securitization trust doesn't really own that mortgage. Could a small number of consumers start creating a paper chase? Yes. Is this going to create a significant issue in the marketplace over time? No, because these loans are owed and eventually the paperwork will be pulled together."
Margo Tank spoke on a panel titled Key Legal requirements for the Mortgage Industry at the MBA's Legal Issues in Mortgage Technology Conference 2007 November 28th and 29th in San Diego, California. To learn more, please see http://events.mortgagebankers.org/email/57679.html.
Appraiser Argues State Authority Preempted by Federal Appraisal Regulations. The First American Corporation has recently filed a motion to dismiss a lawsuit brought by New York Attorney General Andrew Cuomo, arguing that when it performs appraisals for a federal savings bank, its appraisal activity is extensively regulated by the Office of Thrift Supervision (OTS), and thus any state regulation and supervision of such activity is subject to preemption under the Home Owner’s Loan Act (HOLA). Cuomo v. First American Corp., Civ. No. 07-10397 (S.D.N.Y.) On November 1, New York Attorney General Cuomo announced a lawsuit against eAppraiseIT, LLC, (EA), a subsidiary of The First American Corporation, for allegedly colluding with Washington Mutual (WaMu) to inflate the appraisal values of homes, in violation of state and federal appraisal regulations. Defendants EA and The First American Corporation filed a motion to dismiss, claiming, among other things, that appraisals conducted for federal savings and loan transactions are subject to OTS regulations, and therefore the New York Attorney General has “neither regulatory authority nor oversight responsibility” to bring the lawsuit. In support of the motion, the defendants argue, among other things, that “Congress granted to OTS the exclusive power to enforce federal regulations governing the constitution and control of appraisal programs used by savings associations.” Moreover, the defendants note that the OTS and other federal banking regulators have promulgated a comprehensive regulatory scheme addressing the areas implicated in the Attorney General’s lawsuit, namely, rules applicable to “institution-affiliated parties” governing the independence of appraisers, permitting the use of a predetermined panel of appraisers, not prohibiting the thrift’s lending department from influencing the composition of the panel and dictating what is meant by the selection of appraisers. For a copy of the Motion to Dismiss Cuomo, please contact .
State Fraud Claims for No Rate Reduction after Paying Loan Discount Fee Not Preempted. On November 26, the Illinois Appellate Court for the Fifth District held that the National Bank Act did not preempt a consumer’s breach of contract, unjust enrichment, and Illinois Consumer Fraud and Deceptive Practices Act claims in connection with a lender’s alleged failure to reduce the interest rate on a mortgage loan despite the borrower’s payment of a loan discount fee. Treadway v. Nations Credit Financial Services Corp., No. 05-L-27 (Ill. App. Ct. Nov. 26, 2007). The plaintiff alleged that the defendant profited on charges for closing costs and did not reduce the interest rate despite the payment of a “loan discount fee.” The lower court held that Sections 85 and 86 of the National Bank Act preempted the plaintiff’s claims, dismissing the action. The Appellate Court, however, reasoned that because this case did not allege violations of state usury laws, the plaintiff’s claims were not preempted. Citing Burton v. Airborne Express, Inc., 367 Ill. App. 3d 1026, 1032 (2006), on the issue of federal preemption of state contract law, the court stated that “where ‘the court’s concern is restricted to the parties’ bargain,’ there is no preemption.” For a copy of this decision, please contact .
Governor Schwarzenegger Announces Reset Delay Initiative with Servicers. On November 20, California Governor Arnold Schwarzenegger announced an agreement with four major subprime mortgage servicers, Countrywide, GMAC, Litton and HomEq, to provide a “fast-track” to restructure loans made to borrowers with a high risk of default. The agreement asks for servicers to (i) reach out “proactively to borrowers well before their loans reset,” (ii) “[s]treamline the processes by which they determine whether borrowers may reasonably be expected to be able to” make payments after their teaser rates reset, and (iii) extend the teaser rate for “people who are in their homes and making timely payments now at the starter rate, but who lenders determine cannot make the reset payment.” The governor also “encourages” all other lenders and servicers to agree to these principles. There are also news reports that the Bush Administration is working on a similar arrangement with major banks. On November 29th, Gov. Schwarzenegger also unveiled a $1.2 million program to educate at-risk borrowers and fight foreclosure. For more details on the servicer and lender initiative, please see http://www.corp.ca.gov/notices/subprime.html.
Court Blocks Foreclosure Due to Fraud by Third Party Broker and TILA Violation. On November 16, the U.S. District Court for the Northern District of California granted a temporary restraining order to enjoin foreclosure sale proceedings due to fraud by a third party broker in connection with the origination of the loan at issue and a Truth in Lending Act (TILA) violation. Phleger v. Countrywide Home Loans, Inc., 2007 U.S. Dist. LEXIS 86413. The borrower argued that the loan documents were fraudulently prepared without her consent by a third party broker. She asserted that there were numerous indicia of fraud in connection with the loan, which the lender had knowledge of, including inaccuracies in the loan documents and a credit report that indicated that the loan was secured by high-risk property and that the borrower had many recently opened bank accounts. In addition, the loan documents provided for only a two, rather than a three, business day TILA rescission period. Citing Semar v. Platte Valley Fed. Sav. & Loan Ass'n, 791 F.2d 699 (1986), the court noted that even slight technical violations provide grounds for extending a borrower’s right to rescind under TILA. Based on the foregoing, the court held that the borrower met the test for obtaining a temporary restraining order, and the defendants were enjoined from proceeding with the foreclosure pending a preliminary injunction hearing. For a copy of this opinion, please contact .
Rescission Period Ends Three Days after Untimely Receipt of TILA Disclosures. A Pennsylvania federal district court recently held that a borrower did not have the benefit of a three-year rescission period where the lender provided the required Truth in Lending Act (TILA) disclosures two weeks after the borrower had signed them. Colanzi v. Savings First Mortgage, LLC, 2007 U.S. Dist. LEXIS 84416, No. 07-3637 (E.D. Penn. Nov. 15, 2007). The plaintiff signed loan documents that included the required TILA disclosures and the notice of right to rescind, but she did not receive copies of the signed documents until two weeks later. The plaintiff argued that the failure to provide the documents in a timely manner amounted to no disclosure at all, and she therefore should have the benefit of the three year rescission period provided by 12 C.F.R. § 226.23(a). The court disagreed, stating that the law and regulations are clear that if the disclosures are provided, even if their receipt is untimely, the right to rescind expires after the later of the third business day following the delivery of the information or disclosure forms or three days following consummation of the transaction. Because the plaintiff received the disclosures, her rescission period expired three days following receipt of the disclosures. Consequently, the court granted the defendants' motion to dismiss. For a copy of the decision, please contact .
U.S. District Court: Vague Mailer Is Not Valid Firm Offer. The U.S. District Court for the Eastern District of Missouri has denied a lender’s motion for judgment on the pleadings in a Fair Credit Reporting Act (FCRA) “firm offer of credit” case. Klutho v. New Day Financial, LLC, No. 4:06CV1210 CDP, 2007 WL 4169429 (E.D. Mo. Nov. 21, 2007). In this case, the plaintiff received a mailing from defendant New Day Financial offering pre-approved loan for “up to $395,375 or more,” with no information about the minimum amount of credit available, the interest rate, or other terms of the loan. The court held that the solicitation, on its face, “provide[d] no basis for a consumer to regard it as an offer having any value, and there is nothing to distinguish it from any other unsolicited advertisement,” and, therefore, was not a valid firm offer. The court also declined to grant the lender’s motion for judgment on the pleadings on the grounds that its conduct was not willful, holding that the Safeco precedent would not preclude a finding that the lender knew it was violating FCRA or that the lender disregarded advice that it might be doing so. (For more information, see Safeco Insurance Co. v. Burr, 127 S. Ct. 2201 (June 4, 2007) reported in the June 4th InfoBytes Special Alert.) The court indicated, however, that the willfulness issue could be raised again in a motion for summary judgment (in which a factual record bearing on the issue would be available). For a copy of the opinion, contact .
District Court: Violation of FCRA Firm-Offer Requirement Was Not Willful. The same judge of the U.S. District Court for the Eastern District of Missouri who ruled against the lender in Klutho v. New Day Financial granted a different lender’s motion for summary judgment in a similar firm-offer case. Klutho v. Home Loan Center, Inc., No. 4:06CV1212, 2007 U.S. Dist. LEXIS 86303 (Nov. 21, 2007). The court had previously denied the lender’s motion to dismiss, holding that the offer letter was not a valid firm offer because it said little more than that the plaintiff had been preapproved to apply for a loan. (See the November 10, 2006 issue of InfoBytes for a discussion of that ruling.) In the current ruling, the court applied the U.S. Supreme Court’s interpretation of FCRA “willfulness” in Safeco Insurance Co. v. Burr, 127 S. Ct. 2201 (June 4, 2007) to hold although the lender violated FCRA, its interpretation that its firm offer was valid was not “objectively unreasonable,” and, therefore, the lender did not act willfully and was not liable for actual damages. The court stated that, under the Safeco approach, “the factors for determining reasonableness show that HLC is not liable for willfully violating the law. HLC’s interpretation is consistent with the statutory text, the Eighth Circuit has not adopted any standard for determining whether a lender has made a firm offer of credit, and other courts have been persuaded by arguments similar to HLC’s.” For a copy of the opinion, contact .
Claim Alleging Breach of Contract by Servicer Not Preempted under HOLA. The Seventh Circuit recently affirmed a district court’s refusal to dismiss—as preempted by the Home Owners’ Loan Act (HOLA)—a case against a federal thrift alleging numerous state law claims in connection with the thrift’s servicing practices. In re Ocwen Loan Serv., LLC Mortg. Serv. Litig., 491 F.3d 638 (7th Cir. 2007). Among other things, the plaintiff claimed that the servicer breached its contract with the plaintiff by charging late fees on payments that were not late, and increasing the monthly payment amount due without notice. The servicer argued that these allegations were preempted under Section 560.2 of the OTS' regulations, which preempts state laws purporting to impose requirements regarding mortgage loan servicing. The court, however, disagreed, stating that “[i]f an original mortgagee can be sued under state law for breach of contract, so may the partial assignee if he violates the terms of the part of the mortgage contract that has been assigned to him.” But, deeming the case “largely unripe for a determination of preemption,” the court remanded it to the district court for further clarification of relevant facts. For a copy of this opinion, please see http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=06-3132_022.pdf.
DC Council Passes New Non-Traditional Mortgage Disclosure Law. On November 16, the Council of the District of Columbia unanimously passed the Mortgage Disclosure Amendment Act of 2007 (LB 167) which would, if enacted, create a requirement to provide a special disclosure to any borrower seeking a “non-conventional mortgage” and give borrowers 5 days following receipt of the disclosure to cancel the loan application. The bill defines a non-conventional mortgage loan as “any mortgage loan that is not a fixed-rate mortgage loan with an amortization period of 30 years or less.” The law would prohibit mortgage lenders making non-conventional mortgage loans from closing on the transaction until the borrower has signed and returned the disclosure. The format of the disclosure would be established by rulemaking. If signed by the Mayor, and following the 30-day period for Congressional review, the act would take effect upon publication in the DC Register. For a copy of this bill, please see http://www.dccouncil.washington.dc.us/images/00001/20071116163817.pdf.
Colorado Mortgage Company E&O Ins. Will Not Cover Employee Brokers after Jan. 31. Errata – in the November 16th issue of InfoBytes it was reported that new rules proposed by the Colorado Division of Real Estate, requiring licensed mortgage brokers to maintain errors and omission (E&O) insurance, would permit mortgage brokers to “meet the insurance requirements if they are covered under their mortgage company’s policy.” The summary failed to note that this was a temporary exemption under the rules, which ends January 31, 2008. The relevant portion of the rule states that “through and including January 31, 2008, mortgage brokers may also comply with the errors and omissions requirement if . . . [t]hey are an officer, partner, member, exclusive agent, contractor, independent contractor or employee of a mortgage company that maintains errors and omissions insurance and such coverage includes the individual licensee.” We apologize for any confusion this may have caused you. The full rule can be found at http://www.dora.state.co.us/real-estate/rulemaking/MB/Errors_and_Omissions_Insurance.pdf.
FDIC Chairman Says ILC Freeze Will Not Be Extended. On November 28, Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair said that the freeze on applications for insurance by industrial loan companies (ILCs) will not be extended. What was originally intended to be a six month “moratorium” on processing applications for FDIC insurance by industrial banks (reported in the July 28, 2006 issue of InfoBytes) was modified and extended early this year through January 31, 2008 (reported in the February 26th issue of InfoBytes). Chairman Bair’s announcement came in response to questions during a press conference on the FDIC’s report regarding banks’ third quarter earnings. Sources report that the Chairman said the decision not to extend the freeze was due to “litigation risk” resulting from the length of the freeze and the FDIC’s tenuous legal argument for exercising such authority. On May 21, the House of Representatives passed, by a vote of 371 – 16, the Industrial Bank Holding Company Act of 2007 (H.R. 698) which would greatly restrict the ability of retail companies to acquire ILCs. The Senate Banking Committee has not acted on this bill, but there are reports that Banking Committee Chairman Christopher Dodd (D – CT) hopes to introduce his own legislation on this topic shortly. For more information on the House bill, please see http://www.house.gov/apps/list/press/financialsvcs_dem/press052107.shtml.
State Fraud Claims for No Rate Reduction after Paying Loan Discount Fee Not Preempted. On November 26, the Illinois Appellate Court for the Fifth District held that the National Bank Act did not preempt a consumer’s breach of contract, unjust enrichment, and Illinois Consumer Fraud and Deceptive Practices Act claims in connection with a lender’s alleged failure to reduce the interest rate on a mortgage loan despite the borrower’s payment of a loan discount fee. Treadway v. Nations Credit Financial Services Corp., No. 05-L-27 (Ill. App. Ct. Nov. 26, 2007). The plaintiff alleged that the defendant profited on charges for closing costs and did not reduce the interest rate despite the payment of a “loan discount fee.” The lower court held that Sections 85 and 86 of the National Bank Act preempted the plaintiff’s claims, dismissing the action. The Appellate Court, however, reasoned that because this case did not allege violations of state usury laws, the plaintiff’s claims were not preempted. Citing Burton v. Airborne Express, Inc., 367 Ill. App. 3d 1026, 1032 (2006), on the issue of federal preemption of state contract law, the court stated that “where ‘the court’s concern is restricted to the parties’ bargain,’ there is no preemption.” For a copy of this decision, please contact .
Appraiser Argues State Authority Preempted by Federal Appraisal Regulations. The First American Corporation has recently filed a motion to dismiss a lawsuit brought by New York Attorney General Andrew Cuomo, arguing that when it performs appraisals for a federal savings bank, its appraisal activity is extensively regulated by the Office of Thrift Supervision (OTS), and thus any state regulation and supervision of such activity is subject to preemption under the Home Owner’s Loan Act (HOLA). Cuomo v. First American Corp., Civ. No. 07-10397 (S.D.N.Y.) On November 1, New York Attorney General Cuomo announced a lawsuit against eAppraiseIT, LLC, (EA), a subsidiary of The First American Corporation, for allegedly colluding with Washington Mutual (WaMu) to inflate the appraisal values of homes, in violation of state and federal appraisal regulations. Defendants EA and The First American Corporation filed a motion to dismiss, claiming, among other things, that appraisals conducted for federal savings and loan transactions are subject to OTS regulations, and therefore the New York Attorney General has “neither regulatory authority nor oversight responsibility” to bring the lawsuit. In support of the motion, the defendants argue, among other things, that “Congress granted to OTS the exclusive power to enforce federal regulations governing the constitution and control of appraisal programs used by savings associations.” Moreover, the defendants note that the OTS and other federal banking regulators have promulgated a comprehensive regulatory scheme addressing the areas implicated in the Attorney General’s lawsuit, namely, rules applicable to “institution-affiliated parties” governing the independence of appraisers, permitting the use of a predetermined panel of appraisers, not prohibiting the thrift’s lending department from influencing the composition of the panel and dictating what is meant by the selection of appraisers. For a copy of the Motion to Dismiss Cuomo, please contact .
Proposed FACTA Dispute Regulations Submitted for Publication. On November 29, the federal financial regulators (FRB, FDIC, OCC, OTS, NCUA, and FTC) released proposed rules to implement Fair and Accurate Credit Transaction Act (FACTA) provisions that (i) allow consumers to dispute credit report items directly with the furnisher of the information and (ii) require furnishers to take steps to ensure the accuracy and the integrity of the information they provide to credit bureaus. For a more detailed discussion of the proposed rules, see the November 16th issue of InfoBytes. Comments on the proposed rules are due 60 days after their publication in the Federal Register. For the regulators’ press release, and a link to the final rules, see http://www.federalreserve.gov/newsevents/press/bcreg/20071129a.htm.
Claim Alleging Breach of Contract by Servicer Not Preempted under HOLA. The Seventh Circuit recently affirmed a district court’s refusal to dismiss—as preempted by the Home Owners’ Loan Act (HOLA)—a case against a federal thrift alleging numerous state law claims in connection with the thrift’s servicing practices. In re Ocwen Loan Serv., LLC Mortg. Serv. Litig., 491 F.3d 638 (7th Cir. 2007). Among other things, the plaintiff claimed that the servicer breached its contract with the plaintiff by charging late fees on payments that were not late, and increasing the monthly payment amount due without notice. The servicer argued that these allegations were preempted under Section 560.2 of the OTS' regulations, which preempts state laws purporting to impose requirements regarding mortgage loan servicing. The court, however, disagreed, stating that “[i]f an original mortgagee can be sued under state law for breach of contract, so may the partial assignee if he violates the terms of the part of the mortgage contract that has been assigned to him.” But, deeming the case “largely unripe for a determination of preemption,” the court remanded it to the district court for further clarification of relevant facts. For a copy of this opinion, please see http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=06-3132_022.pdf.
Grand Jury Subpoena not Protected from Disclosure by RFPA. Federal Judge Paul Borman recently held that the Right to Financial Privacy Act (RFPA), 12 U.S.C. §§ 3401-3422, does not prohibit the disclosure of a grand jury subpoena served on a bank in connection with the investigation of certain financial improprieties. In U.S. v. Fieger, No. 07-cr-50906 (E.D. Mich., opinion filed Nov. 27, 2007), the defendant was indicted for, among other things, conspiracy to use corporate funds to make prohibited campaign contributions to a 2004 presidential candidate. The defendant then served a subpoena on third party Comerica Bank for any documents the government had served on the bank seeking information about defendant. Comerica moved to quash the subpoena, arguing that production of the grand jury subpoena it received could violate anti-obstruction of justice laws as well as the RFPA. The court granted the motion on the grounds that production of the grand jury subpoena could create obstruction of justice liability. The court disagreed with Comerica, however, that such disclosure would violate the RFPA, finding that the RFPA prohibition on the disclosure of certain information applies only in certain enumerated circumstances not at issue in the case. The court noted that the RFPA did contain a separate mechanism that could be used to prevent the disclosure of the grand jury subpoena, but that that process had not been requested in this case. For a coy of this opinion, please contact .
Proposed FACTA Dispute Regulations Submitted for Publication. On November 29, the federal financial regulators (FRB, FDIC, OCC, OTS, NCUA, and FTC) released proposed rules to implement Fair and Accurate Credit Transaction Act (FACTA) provisions that (i) allow consumers to dispute credit report items directly with the furnisher of the information and (ii) require furnishers to take steps to ensure the accuracy and the integrity of the information they provide to credit bureaus. For a more detailed discussion of the proposed rules, see the November 16th issue of InfoBytes. Comments on the proposed rules are due 60 days after their publication in the Federal Register. For the regulators’ press release, and a link to the final rules, see http://www.federalreserve.gov/newsevents/press/bcreg/20071129a.htm.
U.S. District Court: Vague Mailer Is Not Valid Firm Offer. The U.S. District Court for the Eastern District of Missouri has denied a lender’s motion for judgment on the pleadings in a Fair Credit Reporting Act (FCRA) “firm offer of credit” case. Klutho v. New Day Financial, LLC, No. 4:06CV1210 CDP, 2007 WL 4169429 (E.D. Mo. Nov. 21, 2007). In this case, the plaintiff received a mailing from defendant New Day Financial offering pre-approved loan for “up to $395,375 or more,” with no information about the minimum amount of credit available, the interest rate, or other terms of the loan. The court held that the solicitation, on its face, “provide[d] no basis for a consumer to regard it as an offer having any value, and there is nothing to distinguish it from any other unsolicited advertisement,” and, therefore, was not a valid firm offer. The court also declined to grant the lender’s motion for judgment on the pleadings on the grounds that its conduct was not willful, holding that the Safeco precedent would not preclude a finding that the lender knew it was violating FCRA or that the lender disregarded advice that it might be doing so. (For more information, see Safeco Insurance Co. v. Burr, 127 S. Ct. 2201 (June 4, 2007) reported in the June 4th InfoBytes Special Alert.) The court indicated, however, that the willfulness issue could be raised again in a motion for summary judgment (in which a factual record bearing on the issue would be available). For a copy of the opinion, contact .
District Court: Violation of FCRA Firm-Offer Requirement Was Not Willful. The same judge of the U.S. District Court for the Eastern District of Missouri who ruled against the lender in Klutho v. New Day Financial granted a different lender’s motion for summary judgment in a similar firm-offer case. Klutho v. Home Loan Center, Inc., No. 4:06CV1212, 2007 U.S. Dist. LEXIS 86303 (Nov. 21, 2007). The court had previously denied the lender’s motion to dismiss, holding that the offer letter was not a valid firm offer because it said little more than that the plaintiff had been preapproved to apply for a loan. (See the November 10, 2006 issue of InfoBytes for a discussion of that ruling.) In the current ruling, the court applied the U.S. Supreme Court’s interpretation of FCRA “willfulness” in Safeco Insurance Co. v. Burr, 127 S. Ct. 2201 (June 4, 2007) to hold although the lender violated FCRA, its interpretation that its firm offer was valid was not “objectively unreasonable,” and, therefore, the lender did not act willfully and was not liable for actual damages. The court stated that, under the Safeco approach, “the factors for determining reasonableness show that HLC is not liable for willfully violating the law. HLC’s interpretation is consistent with the statutory text, the Eighth Circuit has not adopted any standard for determining whether a lender has made a firm offer of credit, and other courts have been persuaded by arguments similar to HLC’s.” For a copy of the opinion, contact .
Appraiser Argues State Authority Preempted by Federal Appraisal Regulations. The First American Corporation has recently filed a motion to dismiss a lawsuit brought by New York Attorney General Andrew Cuomo, arguing that when it performs appraisals for a federal savings bank, its appraisal activity is extensively regulated by the Office of Thrift Supervision (OTS), and thus any state regulation and supervision of such activity is subject to preemption under the Home Owner’s Loan Act (HOLA). Cuomo v. First American Corp., Civ. No. 07-10397 (S.D.N.Y.) On November 1, New York Attorney General Cuomo announced a lawsuit against eAppraiseIT, LLC, (EA), a subsidiary of The First American Corporation, for allegedly colluding with Washington Mutual (WaMu) to inflate the appraisal values of homes, in violation of state and federal appraisal regulations. Defendants EA and The First American Corporation filed a motion to dismiss, claiming, among other things, that appraisals conducted for federal savings and loan transactions are subject to OTS regulations, and therefore the New York Attorney General has “neither regulatory authority nor oversight responsibility” to bring the lawsuit. In support of the motion, the defendants argue, among other things, that “Congress granted to OTS the exclusive power to enforce federal regulations governing the constitution and control of appraisal programs used by savings associations.” Moreover, the defendants note that the OTS and other federal banking regulators have promulgated a comprehensive regulatory scheme addressing the areas implicated in the Attorney General’s lawsuit, namely, rules applicable to “institution-affiliated parties” governing the independence of appraisers, permitting the use of a predetermined panel of appraisers, not prohibiting the thrift’s lending department from influencing the composition of the panel and dictating what is meant by the selection of appraisers. For a copy of the Motion to Dismiss Cuomo, please contact .
State Fraud Claims for No Rate Reduction after Paying Loan Discount Fee Not Preempted. On November 26, the Illinois Appellate Court for the Fifth District held that the National Bank Act did not preempt a consumer’s breach of contract, unjust enrichment, and Illinois Consumer Fraud and Deceptive Practices Act claims in connection with a lender’s alleged failure to reduce the interest rate on a mortgage loan despite the borrower’s payment of a loan discount fee. Treadway v. Nations Credit Financial Services Corp., No. 05-L-27 (Ill. App. Ct. Nov. 26, 2007). The plaintiff alleged that the defendant profited on charges for closing costs and did not reduce the interest rate despite the payment of a “loan discount fee.” The lower court held that Sections 85 and 86 of the National Bank Act preempted the plaintiff’s claims, dismissing the action. The Appellate Court, however, reasoned that because this case did not allege violations of state usury laws, the plaintiff’s claims were not preempted. Citing Burton v. Airborne Express, Inc., 367 Ill. App. 3d 1026, 1032 (2006), on the issue of federal preemption of state contract law, the court stated that “where ‘the court’s concern is restricted to the parties’ bargain,’ there is no preemption.” For a copy of this decision, please contact .
Court Blocks Foreclosure Due to Fraud by Third Party Broker and TILA Violation. On November 16, the U.S. District Court for the Northern District of California granted a temporary restraining order to enjoin foreclosure sale proceedings due to fraud by a third party broker in connection with the origination of the loan at issue and a Truth in Lending Act (TILA) violation. Phleger v. Countrywide Home Loans, Inc., 2007 U.S. Dist. LEXIS 86413. The borrower argued that the loan documents were fraudulently prepared without her consent by a third party broker. She asserted that there were numerous indicia of fraud in connection with the loan, which the lender had knowledge of, including inaccuracies in the loan documents and a credit report that indicated that the loan was secured by high-risk property and that the borrower had many recently opened bank accounts. In addition, the loan documents provided for only a two, rather than a three, business day TILA rescission period. Citing Semar v. Platte Valley Fed. Sav. & Loan Ass'n, 791 F.2d 699 (1986), the court noted that even slight technical violations provide grounds for extending a borrower’s right to rescind under TILA. Based on the foregoing, the court held that the borrower met the test for obtaining a temporary restraining order, and the defendants were enjoined from proceeding with the foreclosure pending a preliminary injunction hearing. For a copy of this opinion, please contact .
U.S. District Court: Vague Mailer Is Not Valid Firm Offer. The U.S. District Court for the Eastern District of Missouri has denied a lender’s motion for judgment on the pleadings in a Fair Credit Reporting Act (FCRA) “firm offer of credit” case. Klutho v. New Day Financial, LLC, No. 4:06CV1210 CDP, 2007 WL 4169429 (E.D. Mo. Nov. 21, 2007). In this case, the plaintiff received a mailing from defendant New Day Financial offering pre-approved loan for “up to $395,375 or more,” with no information about the minimum amount of credit available, the interest rate, or other terms of the loan. The court held that the solicitation, on its face, “provide[d] no basis for a consumer to regard it as an offer having any value, and there is nothing to distinguish it from any other unsolicited advertisement,” and, therefore, was not a valid firm offer. The court also declined to grant the lender’s motion for judgment on the pleadings on the grounds that its conduct was not willful, holding that the Safeco precedent would not preclude a finding that the lender knew it was violating FCRA or that the lender disregarded advice that it might be doing so. (For more information, see Safeco Insurance Co. v. Burr, 127 S. Ct. 2201 (June 4, 2007) reported in the June 4th InfoBytes Special Alert.) The court indicated, however, that the willfulness issue could be raised again in a motion for summary judgment (in which a factual record bearing on the issue would be available). For a copy of the opinion, contact .
District Court: Violation of FCRA Firm-Offer Requirement Was Not Willful. The same judge of the U.S. District Court for the Eastern District of Missouri who ruled against the lender in Klutho v. New Day Financial granted a different lender’s motion for summary judgment in a similar firm-offer case. Klutho v. Home Loan Center, Inc., No. 4:06CV1212, 2007 U.S. Dist. LEXIS 86303 (Nov. 21, 2007). The court had previously denied the lender’s motion to dismiss, holding that the offer letter was not a valid firm offer because it said little more than that the plaintiff had been preapproved to apply for a loan. (See the November 10, 2006 issue of InfoBytes for a discussion of that ruling.) In the current ruling, the court applied the U.S. Supreme Court’s interpretation of FCRA “willfulness” in Safeco Insurance Co. v. Burr, 127 S. Ct. 2201 (June 4, 2007) to hold although the lender violated FCRA, its interpretation that its firm offer was valid was not “objectively unreasonable,” and, therefore, the lender did not act willfully and was not liable for actual damages. The court stated that, under the Safeco approach, “the factors for determining reasonableness show that HLC is not liable for willfully violating the law. HLC’s interpretation is consistent with the statutory text, the Eighth Circuit has not adopted any standard for determining whether a lender has made a firm offer of credit, and other courts have been persuaded by arguments similar to HLC’s.” For a copy of the opinion, contact .
Rescission Period Ends Three Days after Untimely Receipt of TILA Disclosures. A Pennsylvania federal district court recently held that a borrower did not have the benefit of a three-year rescission period where the lender provided the required Truth in Lending Act (TILA) disclosures two weeks after the borrower had signed them. Colanzi v. Savings First Mortgage, LLC, 2007 U.S. Dist. LEXIS 84416, No. 07-3637 (E.D. Penn. Nov. 15, 2007). The plaintiff signed loan documents that included the required TILA disclosures and the notice of right to rescind, but she did not receive copies of the signed documents until two weeks later. The plaintiff argued that the failure to provide the documents in a timely manner amounted to no disclosure at all, and she therefore should have the benefit of the three year rescission period provided by 12 C.F.R. § 226.23(a). The court disagreed, stating that the law and regulations are clear that if the disclosures are provided, even if their receipt is untimely, the right to rescind expires after the later of the third business day following the delivery of the information or disclosure forms or three days following consummation of the transaction. Because the plaintiff received the disclosures, her rescission period expired three days following receipt of the disclosures. Consequently, the court granted the defendants' motion to dismiss. For a copy of the decision, please contact .
Claim Alleging Breach of Contract by Servicer Not Preempted under HOLA. The Seventh Circuit recently affirmed a district court’s refusal to dismiss—as preempted by the Home Owners’ Loan Act (HOLA)—a case against a federal thrift alleging numerous state law claims in connection with the thrift’s servicing practices. In re Ocwen Loan Serv., LLC Mortg. Serv. Litig., 491 F.3d 638 (7th Cir. 2007). Among other things, the plaintiff claimed that the servicer breached its contract with the plaintiff by charging late fees on payments that were not late, and increasing the monthly payment amount due without notice. The servicer argued that these allegations were preempted under Section 560.2 of the OTS' regulations, which preempts state laws purporting to impose requirements regarding mortgage loan servicing. The court, however, disagreed, stating that “[i]f an original mortgagee can be sued under state law for breach of contract, so may the partial assignee if he violates the terms of the part of the mortgage contract that has been assigned to him.” But, deeming the case “largely unripe for a determination of preemption,” the court remanded it to the district court for further clarification of relevant facts. For a copy of this opinion, please see http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=06-3132_022.pdf.
Grand Jury Subpoena not Protected from Disclosure by RFPA. Federal Judge Paul Borman recently held that the Right to Financial Privacy Act (RFPA), 12 U.S.C. §§ 3401-3422, does not prohibit the disclosure of a grand jury subpoena served on a bank in connection with the investigation of certain financial improprieties. In U.S. v. Fieger, No. 07-cr-50906 (E.D. Mich., opinion filed Nov. 27, 2007), the defendant was indicted for, among other things, conspiracy to use corporate funds to make prohibited campaign contributions to a 2004 presidential candidate. The defendant then served a subpoena on third party Comerica Bank for any documents the government had served on the bank seeking information about defendant. Comerica moved to quash the subpoena, arguing that production of the grand jury subpoena it received could violate anti-obstruction of justice laws as well as the RFPA. The court granted the motion on the grounds that production of the grand jury subpoena could create obstruction of justice liability. The court disagreed with Comerica, however, that such disclosure would violate the RFPA, finding that the RFPA prohibition on the disclosure of certain information applies only in certain enumerated circumstances not at issue in the case. The court noted that the RFPA did contain a separate mechanism that could be used to prevent the disclosure of the grand jury subpoena, but that that process had not been requested in this case. For a coy of this opinion, please contact .
Proposed FACTA Dispute Regulations Submitted for Publication. On November 29, the federal financial regulators (FRB, FDIC, OCC, OTS, NCUA, and FTC) released proposed rules to implement Fair and Accurate Credit Transaction Act (FACTA) provisions that (i) allow consumers to dispute credit report items directly with the furnisher of the information and (ii) require furnishers to take steps to ensure the accuracy and the integrity of the information they provide to credit bureaus. For a more detailed discussion of the proposed rules, see the November 16th issue of InfoBytes. Comments on the proposed rules are due 60 days after their publication in the Federal Register. For the regulators’ press release, and a link to the final rules, see http://www.federalreserve.gov/newsevents/press/bcreg/20071129a.htm.
FTC Study Finds 8.3 Million ID Theft Victims in U.S. in 2005. On November 27, the Federal Trade Commission (FTC) released a telephone survey study that estimated 8.3 million Americans, or 3.7% of the adult population, had been victims of identity theft in 2005. Among the study’s many findings, 37% of victims reported experiencing problems beyond the time they spent recovering from identity theft and their out-of-pocket expenses, including “being harassed by debt collectors, being denied new credit, being unable to use existing credit cards, being unable to get loans, having their utilities cut off, being subject to a criminal investigation or civil suit, being arrested, and having difficulties obtaining or accessing bank accounts.” The study also found that victims were more than twice as likely to report having one or more of these types of problems when thieves opened new accounts and committed other frauds than when thieves misused only existing accounts. For more information, and a copy of the study, please see http://www.ftc.gov/opa/2007/11/idtheft.shtm.
Proposed FACTA Dispute Regulations Submitted for Publication. On November 29, the federal financial regulators (FRB, FDIC, OCC, OTS, NCUA, and FTC) released proposed rules to implement Fair and Accurate Credit Transaction Act (FACTA) provisions that (i) allow consumers to dispute credit report items directly with the furnisher of the information and (ii) require furnishers to take steps to ensure the accuracy and the integrity of the information they provide to credit bureaus. For a more detailed discussion of the proposed rules, see the November 16th issue of InfoBytes. Comments on the proposed rules are due 60 days after their publication in the Federal Register. For the regulators’ press release, and a link to the final rules, see http://www.federalreserve.gov/newsevents/press/bcreg/20071129a.htm.
© Buckley Kolar, LLP 2005. INFOBYTES is not intended as legal advice to any person or firm. It is provided as a client service and information contained herein is drawn from various public sources, including other publications.
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